Green finance is crucial for the future of farming. This is the view of Albert Coetzee, industry affairs manager at the Citrus Growers’ Association of Southern Africa (CGASA), who believes that sustainable practices, supported by financial innovation, will define the future of the agricultural sector.
Speaking at a Nampo Cape conversation hosted by Food For Mzansi, Coetzee emphasizsd the importance of balancing environmental responsibility with financial viability, stating, “We need to start referring to it as green finance. There’s a huge opportunity to finance practices like better irrigation systems or renewable energy, but it needs research and support.”
Coetzee and Liane Petzer, regional specialist in manufacturing, renewable energy, transport, and logistics at Absa, outlined how the bank is positioning itself at the forefront of this shift.
With increasing pressures from legislation such as the Carbon Tax and international policies like the Carbon Border Adjustment Mechanism (CBAM), both agree farmers will require tailored financial solutions to adopt carbon-friendly practices while remaining profitable.
Petzer specifically highlighted the role of renewable energy in the future of farming. She noted that green finance is not just about supporting traditional sustainable practices but also about investing in new technologies.
“Renewable energy projects, such as solar and wind power installations, are becoming increasingly vital for farms looking to reduce their carbon footprints,” Petzer said.
“Absa is committed to supporting these initiatives by providing tailored financial products that facilitate the transition to renewable energy sources.”
Teneal Marthinus, an agronomist at ForFarmers Group in Bredasdorp, Western Cape, also added her perspective on the importance of green finance in helping farmers transition to sustainable farming practices.
She highlighted the role of education and practical guidance in this process. “Many farmers are willing to adopt more sustainable methods, but they lack the technical know-how or financial backing to implement changes effectively. This is where financial institutions like Absa can really make a difference,” said Marthinus.
Marthinus emphasised that green finance should also be accessible to small-scale farmers who are often left out of large-scale financing schemes.
“We need to ensure that everyone in agriculture, regardless of their scale, has access to financial tools that allow them to contribute to a greener future,” she added.
Tailored financial solutions for farmers
Petzer stressed Absa’s role in providing customised financial products that align with the specific needs of farmers, noting that their offerings are designed to fit the unique cash flow patterns of both small-scale and commercial operations.
“We tailor-make the product term to suit your cash flow needs for that period,” she said. This approach is especially crucial for small-scale farmers who often struggle with access to affordable finance.
One standout solution is the Energy Bounce Back scheme, which helps farmers access funds at attractive interest rates, thanks to a government-backed 20% guarantee.
“Because we get a 20% government guarantee on a first-loss basis, we are able to offer very attractive interest rates,” Petzer added. This scheme has been particularly beneficial for small-scale farmers looking to invest in sustainable practices.
Sustainable practices: A balancing act
While green finance offers a pathway toward a more sustainable future, Coetzee emphasized that financial sustainability is equally important.
“Sustainability is important, but we shouldn’t focus on adopting environmentally-friendly practices if it’s going to kill us financially,” he said.
Coetzee highlighted the need for balance, citing the Brundtland Commission’s definition of sustainable development, which stresses the importance of making money while safeguarding the future.
Marthinus echoed this sentiment, noting that while sustainability is crucial, it has to be practical.
“Farmers are under increasing pressure to reduce their carbon footprint, but we must remember that they also need to maintain productivity and profitability,” she explained. “It’s about finding the right balance between adopting new technologies and ensuring the farm remains financially viable.”
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One area where this balance is being tested is Integrated Pest Management (IPM). IPM prioritises biological controls and minimizes chemical usage, but the variability in chemical usage from year to year can make it difficult for farmers to meet market demands, particularly from European retailers.
“Retailers, especially the Germans, prefer to have three or four active substances on their fruit,” Coetzee explained. He added that markets are slow to adapt to IPM’s approach, which may result in either no chemical use one year or the use of several active substances another year.
Beyond IPM, drip irrigation and fertigation systems are other sustainable practices being adopted to reduce water and fertiliser usage.
While these systems have proven effective in reducing water consumption by 14-20% and fertiliser usage by 30%, the high costs remain a barrier. “It’s effective, but unfortunately, extremely costly. A new system can cost up to a million rand per hectare,” Coetzee noted.
Overcoming market and financial barriers
One of the critical challenges farmers face is getting markets to accept produce that may not meet increasingly stringent quality standards. Coetzee pointed out that practices like netting – which protects fruit trees from wind damage – are often adopted due to market demands.
“The markets are getting so finicky with regards to the quality they want,” he said.
“We need to work on getting retailers to understand that a small mark on the fruit due to wind doesn’t mean there’s anything wrong with it.”
Petzer echoed these concerns, particularly for small-scale farmers who struggle to focus on sustainability while trying to make ends meet. “It’s difficult to have a conversation about sustainability when a farmer is struggling to finance the next season’s crop,” she said.
However, she reaffirmed Absa’s commitment to helping farmers see the long-term benefits of sustainable practices. “The only way we can achieve our net-zero goal by 2050 is if we take our clients with us,” she added.
The future of farming
Coetzee, Petzer, and Marthinus see the future of farming as being heavily reliant on green finance.
With research driving innovation, new crop varieties requiring less water and more resistance to disease are being developed, offering farmers sustainable options that also ensure profitability. “There’s a lot of research being done, and I can expect a few more innovations to come our way soon,” Coetzee said.
Marthinus highlighted the importance of continued investment in education and innovation: “The future of farming lies in a combination of financial support and cutting-edge research. Farmers need access to both if they are to thrive in an increasingly competitive and climate-conscious market.”
Looking ahead, Absa’s role in financing sustainable agriculture is set to grow. By aligning their financial products with the evolving needs of the agricultural sector, the bank is poised to help farmers not only survive but thrive in a more environmentally-conscious and financially sustainable future.
As Coetzee put it, “Sustainability is important, but it has to be financially viable. Green finance is the key to ensuring we can achieve both.”
Click on this link to download the Absa AgriTrends report, which highlights South Africa’s agricultural export landscape and how the sector is adapting to global challenges. Ready to get smart AgriBusiness banking solutions? Click here.
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